Britain has entered recession for the first time since 1991, official data is expected to confirm on Friday, with national output forecast to have fallen by 1.2% in the final three months of 2008.
Britain will be the first major economy to publish gross domestic product data for the period, and is set to kick off a gloomy season of releases as the global economic downturn exacts a heavy price worldwide.
Economists polled by Reuters on average predict the economy shrank by 1.2% between October and December, which after the 0.6% fall between July and September marks the two successive quarters of decline which usually define a recession. If this forecast is right, it would be the sharpest quarterly slump since the Q3 of 1990, and one last exceeded in the deep downturn of 1980.
The United States, Japan and Germany are already in recession and Britain has only narrowly avoided meeting the technical definition so far.
Economists have revised down GDP forecasts over recent weeks as official data on industrial production and monthly activity surveys have indicated a sharp contraction. The National Institute of Economic and Social Research predicts a 1.5% slowdown in Q4.
“This sudden deterioration puts official forecasts of a relatively shallow and short-lived downturn in serious doubt. Private forecasters are increasingly building in a recession at least as bad as the early 1990s, stretching into 2010,” said Andrew Smith, chief economist at accountancy firm KPMG. Reuters polls show that Britain’s Q4 output in 2008 is forecast to be 1.4% lower than a year earlier.
Little Christmas cheer is expected from December retail sales data released at the same time on Friday. Economists expect retail sales fell 0.6% in December and to be just 1.6% higher than a year earlier, despite aggressive discounting by stores. “Trading statements have revealed both winners and losers but, on the whole, December was not a complete write- off,” Capital Economics wrote in a note to clients. (Reuters)